Posts Tagged ‘UAW Retiree Medical Benefits Trust’

Ford Motor Company (NYSE:F) today is reducing its debt by more than $4 billion by retiring debt owed to the UAW Retiree Medical Benefits Trust ahead of schedule. The company said it is taking the action to strengthen its balance sheet.

Analysts have noted that although Ford escaped bankruptcy during the Global Great Recession, it still has a relatively large amount of debt.

Moreover, Ford is increasingly returning to fleet sales in the U.S. this year to keep momentum going, and it is losing ground in Europe to stronger French competitors, notably Renault, due to pricing and quality issues. The stock has been under selling pressure recently and is currently trading on the $10 range. (See European Auto Market Tanks in May)

Nonetheless, Ford says it will post a profit and positive automotive operating-related cash flow this year, which means the stock price could be caught in forces beyond Ford’s control.

Ford is making scheduled payments in cash totaling about $860 million on Notes A and B held by the UAW Retiree Medical Benefits Trust – including about $250 million due under Note A, and $610 million due under Note B. Ford had the option to pay Note B with cash or Ford stock but agreed to pay with cash.

In addition, Ford and its subsidiary, Ford Motor Credit Company, are paying a combined $2.9 billion to retire the remaining obligation on Note A at an agreed upon discount of 2%.

Separately, Ford is making a $255 million cash payment to bring current previously deferred quarterly distributions on the 6.50% Cumulative Trust Preferred Securities of Ford Motor Company Capital Trust II.

With today’s actions and an April payment of $3 billion on its 2013 revolving credit facility, Ford will have reduced its debt by more than $7 billion in the second quarter. The second quarter debt reduction will save Ford more than $470 million in annual interest expense.

Debt Free!

“We expect to continue to improve our balance sheet as we deliver on our plan,” said Ford President and CEO Alan Mulally.

“Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks,” Mulally claimed.

The speed of the bankruptcy proceeding could not be matched by an impending reorganization plan.

General Motors Company, or the new GM, is abandoning the old way of doing business that drove it into bankruptcy, according to its CEO. He also will streamline its organization, focus on “best in class” products and attract enough customers to stop its sales slide.

The U.S. taxpayer-owned company is expected to go public by the middle of next year. And GM wants to pay off its U.S. loans that are currently keeping it afloat well before the required 2015 date.

These are all extremely ambitious goals, to put it politely, coming from a management team comprised almost entirely of old-line GM executives who set the policy and made the decisions that resulted in the largest corporate bankruptcy in U.S. history.

“One thing we have learned from the last 100 days is that GM can move quickly and decisively,” said Fritz Henderson, CEO. “Today, we take the intensity, decisiveness and speed of the past several months and transfer it from the triage of the bankruptcy process to the creation and operation of a new General Motors.”

The problem confronting GM — new or old — is the continuing decline in production, sales and share in the toughest vehicle market since WW2.

Keep up with the Reorganization!

Little new ground in the all critical product or cost cutting areas was covered by Henderson in his first press conference as the operational head of GM Company, which was created today by an asset sale approved by a bankruptcy court in New York on July 5th. In fact, the cliche’s of a product and customer focused organization, repeated over and over, seemed more suitable for an internal pep rally than for a news event after a near death experience for a company whose future is still by no means assured.

Even the claim that GM can move quickly was cast in doubt by the lack of detail in just how GM is going to trim its bloated corporate ranks. Henderson’s new management organization was being prepared in anticipation of a July 31st closing date, and the restructuring could not keep pace with the swiftness of the bankruptcy proceeding.

General Motors Company will be headquartered in Detroit and led by Fritz Henderson as the president and chief executive officer.

The U.S. Bankruptcy Court for the Southern District of New York approved the sale of almost all of General Motors Corporation’s assets to NGMCO, Inc., a new legal entity funded by U.S. taxpayers for about $51 billion. An appeal by product liability lawyers is unlikely to halt the sale at noon on July 9th.

When the sale closes, during the next week, NGMCO, Inc. will change its name to General Motors Company and continue to operate much like GM did in the past, albeit with only four core brands, and far fewer employees and dealers. Current GM employees will be offered positions by the new company. The current General Motors Corporation will then change its name to Motors Liquidation Company. It will ultimately be dissolved under direction of the court.

Stay auto news solvent!

General Motors Company will be headquartered in Detroit and will be led by Fritz Henderson as president and chief executive officer. Edward E. Whitacre, Jr.is chairman of the board of directors.

Also selected to serve on the board of directors are six current members of the GM Corporation board — Erroll Davis, Neville Isdell, Kent Kresa, Philip Laskawy, Kathryn Marinello and Fritz Henderson.